Deductible expenses of two homes

We bought a new home in 2013. Our old home, in which we made substantial repairs, new roof, new kitchen, etc., has sat on the market from February 2013 to the present.

What, if anything, can we take as deductions to our taxes for 2013? If it doesn't sell soon, we will have to rent.

Thank you.
-- Diane

Dear Diane,
You are in a tough situation while you wait out the current real estate market. You will be able to deduct the property taxes on Schedule A as an itemized deduction. And if you are not already claiming a mortgage interest deduction on another second home, you will be able to deduct qualifying mortgage interest subject to the mortgage interest limitation rules. See IRS Publication 936 Home Mortgage Interest Deduction for further details.

In the meantime, keep track of all your receipts for the substantial repairs, new roof and new kitchen, as these costs will be added to your "basis" when calculating any gain on the sale of the home. Additionally, if you decide to rent out the home, then you will need this information to calculate the depreciation expense of the home. See IRS Form 4562 for depreciation deductions on rental property.

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Judy O'Connor has been a practicing CPA for more than 25 years in the South Florida community and assists her diverse client base in all aspects of tax compliance at a local, state and federal level. Her clients consist of individuals, corporations, limited liability companies, partnerships and estates.

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